Word that same-store sales in the US were flat in December sent McDonald's (NYSE: MCD) shares down yesterday. In a move to off-set its high penetration in its older markets, MCD is getting more aggressive in China. According to the company's chief there, the fast food chain will open 125 stores this year and as many as 150 next year.
According to Reuters, "the firm plans to spend $2 billion on capital expenditures in 2008, and sell up to 21 percent of its company-owned restaurants to franchisees over the next few years to focus more resources into fast-growing markets such as China, Russia and India. "
The move is a classic answer to slowing US spending and a mature business in its home market. Retailers like Wal-Mart (NYSE: WMT) have taken the same route. But moving into China does not guarantee a smooth ride to fast growth. As some US companies have found, the central government likes to put unions and units of the Communist party into US companies operating in the world's most populated country. China may also fall into an economic slowdown of its own if its exports are undercut by a recession in the US.
China may look like a "cure all" to US firms, but it isn't.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
1-29-2008 @ 7:35AM
Rob said...
Smart move. I keep track of most of the Chinese stocks and have rankings at times.
Stop by to read up more
http://www.Wallastoninvestments.com
1-30-2008 @ 10:19PM
Brockage said...
The Chinese seem to be addicted to lead -- I hope McDonald's doesn't have to shake lead dust on the fries.